JAKARTA Jan 10 Indonesia's central bank kept
its benchmark policy rate unchanged as expected on Thursday, at
a record low of 5.75 percent for the 12th month, with inflation
relatively mild and domestic growth still looking strong despite
All 17 economists polled by Reuters had expected the policy
rate to be kept steady to support Southeast Asia's largest
economy as it faces current account and trade deficits, which
are adding fresh pressure to the already weakened rupiah.
The central bank said it remained vigilant on the current
account deficit, but saw its policy rate as consistent with
inflation that it sees as manageable at between 3.5 percent and
5.5 percent in the next two years.
Ten economists forecast the policy rate would be kept
unchanged until after the first half of the year.
"BI has been widely expected to continue holding a cautious
stance on monetary policy ... We continue to think that there is
a good chance of seeing BI reversing some of its policy rate
cuts this year, as we remain of the view that inflation may
overshoot the official target," said Gundy Cahyadi, economist at
OCBC in Singapore.
The statistics bureau last week announced that December
annual inflation edged down to 4.3 percent, from 4.32 percent a
month earlier, well within Bank Indonesia's target range.
But in spite of benign inflation and solid domestic growth,
trade figures in November remained poor in tandem with weak
demand from major trading partners.
The rupiah, which fell over 6 percent last year to be
emerging Asia's worst performing currency, has extended losses
Fears of capital outflows hit the unit again on Thursday.
The rupiah spot's indicative prices slid 0.5
percent to 9,700 per dollar on exchange pages, down 0.7 percent
this year, but its real price was softer with 9,850-9,870
traded, dealers said.
One-month dollar/rupiah rose 0.6 percent to
9,930, its highest since September 2009.
Some economists polled prior to the board of governors'
meeting expected BI to start hiking the deposit facility rate,
or FASBI, in the first half of the year to help shore up the
The central bank made no mention of the rate in its policy
announcement. It said its policy focus was to manage external
imbalances and to maintain the exchange rate.
Finance Minister Agus Martowardojo said trade imbalances
have put the current account at $21.5 billion in deficit last
While the economy showed resilience in the face of the
global downturn last year, recent economic data indicate
Indonesian consumers are growing less confident due to concerns
over jobs and wages. Retail sales grew at a slower pace in
November despite discounting by stores ahead of the holiday
Manufacturing activity expanded at a slower rate in
December, as growth in export orders declined from a month
earlier, an HSBC Markit survey showed.
(Additional reporting by Adriana Nina Kusuma and Andjarsari
Paramaditha; Editing by Neil Chatterjee and Kim Coghill)